CHALLENGES
“
AT THE BORDER
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137
cheap inputs from other countries. The cascading pattern of tariff rates along the level of processing is called tariff escalation Figure 3.5 shows the tariff escalation in EU and Asian markets. The reverse escalation tariff on cotton and cotton products in Asia is due to an exceptionally high tariff on cotton imposed by China. Tariff escalation is quite visible in Asian markets on some of the leading exports from Africa (table Tariff escalation discourages processing activities in Africa for the products exported to Asia. A poignant example is an Indian-owned cashew firm in Tanzania seeking to export roasted, rather than simply raw, nuts to
India. It does not do so because India imposes higher tariffs on processed nuts than on raw nuts (box 3.1).
Tariff Barriers or Supply Constraint One important caveat to the discussion of tariff barriers on African products is the issue of whether there is a supply constraint in Africa. Unless
African countries are able to produce such products and identify where demand exists, removal of tariff barriers will not be effective.
Korea
Indonesia
Malaysia
Singapore
Rest of Asia
African countries
LDC
Non-LDC
LDC
Non-LDC
LDC
Non-LDC
LDC
Non-LDC
LDC
Non-LDC
3 4
5 3
6 25 81 17 6
11 1
0 2
10 3
1 0
1 1
1 34 15 86 44 26 28 5
5 63 17 0
0 0
0 0
0 0
0 0
0 0
3 7
8 5
4 1
18 0
7 38 70 0
27 53 37 10 35 29 59 7
6 0
5 7
3 2
17 0
4 16 1
0 2
1 1
0 6
0 1
0 0
0 0
0 0
0 0
0 0
100 100 100 100 100 100 100 100 100 100 03-Chap3:03-Chap3 10/10/06 10:08 AM Page 137
138
AFRICA
’
S SILK ROAD
:
CHINA AND INDIA
’
S
NEW ECONOMIC FRONTIERAfrican producers do not effectively capture the benefit of low tariffs for some products in Asian markets due to alack of production capacity. For example, although the tariff on cotton is high in China, the tariff on cotton yarns is relatively low. Despite this potential opportunity, African countries have not been able to take advantage of low tariffs on cotton products figure. The cotton-growing African countries export almost exclusively to China, where the tariffs are excessively high.
On the other hand, as illustrated in chapter 2, Africa imports large quantities of cotton yarns, cotton fabrics, apparel, and footwear from China.
Another example is cocoa beans. Figure 3.7 illustrates how Chinese consumers are increasingly importing processed products of cocoa beans,
such as cocoa powder,
cocoa paste, and chocolate, while their imports of raw cocoa beans have diminished slightly. However, Africa’s exports of cocoa beans to China are increasing and dominate its exports of cocoa powder and chocolate.
6
China imposes only a 9 percent tariff on finished
TABLE 3.4
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